Title
Arbilon vs. Manlangit
Case
G.R. No. 197920
Decision Date
Jan 22, 2018
Respondent purchased a compressor on credit, failed to pay, and voluntarily surrendered it. Leanillo paid installments on respondent's behalf. SC ruled respondent as owner, affirming CA, with Leanillo entitled to reimbursement.
ownership
possession
contract to sell
A

Case Summary (G.R. No. 197920)

Factual Background

The dispute arose from a retail installment purchase from Davao Diamond Industrial Supply of one compressor and one stainless pump allegedly bought on credit for PHP 200,000.00 and PHP 65,000.00, respectively. Respondent claimed that the compressor remained in the possession of petitioner from November 1997 until the filing of the complaint and that petitioner refused to return it despite demand. Petitioner denied that respondent owned the compressor and averred that ownership never vested in respondent because respondent failed to pay the purchase price. Petitioner asserted that he had voluntarily assumed the obligation to pay for the compressor to Davao Diamond in installments because the equipment was indispensable to mining operations conducted by Double A.

Procedural Posture and Writ of Replevin

Respondent filed a Complaint for recovery of possession of personal properties with writ of replevin and/or sum of money, with damages and attorney’s fees. The RTC, upon posting of bond, granted the writ of replevin and delivered the compressor to respondent. Petitioner filed an Answer with Counterclaim contesting respondent’s ownership and asserting his right to possess.

Evidence Concerning Payment and Possession

During trial testimony established that Lucia Sanchez Leanillo (Leanillo) paid four installments for the compressor in 1998 as evidenced by cash vouchers and receipts issued by Davao Diamond. Respondent admitted a history of mining operations in which financing shifted among several persons, including petitioner, Major Efren Alcuizar, and Leanillo. Respondent also wrote Davao Diamond a letter dated August 5, 1999, which the RTC characterized as a voluntary surrender of the compressor and pump because respondent could not pay for them.

Ruling of the Regional Trial Court

The RTC found that respondent had failed to pay and that by his letter of August 5, 1999 he voluntarily surrendered whatever rights he had in the compressor and pump to Davao Diamond. The RTC concluded that Leanillo’s payment did not operate to revest ownership in respondent and that respondent was therefore not entitled to possession. The RTC ordered dismissal of the complaint, dissolved the writ of seizure, declared respondent not entitled to possession, ordered the return of the compressor to petitioner and Leanillo or, if return was impossible, awarded its value with legal interest, and granted petitioner attorney’s fees and litigation expenses.

Ruling of the Court of Appeals

The CA reversed. It characterized the transaction between respondent and Davao Diamond as a contract to sell because Sales Invoice No. 82911 expressly provided that the goods remained the property of the seller until fully paid. The CA held that Leanillo’s payments, evidenced by receipts, constituted payment on behalf of respondent rather than an independent purchase, that respondent thereby satisfied the obligation, and that ownership passed to respondent. The CA declared respondent the owner of the compressor and entitled to its possession, and awarded respondent litigation expenses and attorney’s fees against petitioner.

Issues Presented to the Supreme Court

Petitioner raised two principal issues: whether the CA erred in ruling that respondent is the owner of the compressor and thus entitled to its possession; and whether the funds used by Leanillo to pay for the compressor came from respondent’s partnership share.

Legal Framework on Contract to Sell and Possession

The Court analyzed the nature of the sales transaction under the doctrine that a contract to sell reserves title in the seller until full payment. The CA and the Court treated the sales invoice as the best evidence of the parties’ agreement and observed that a provision reserving ownership until full payment manifests the earmarks of a contract to sell. The Supreme Court accepted that characterization and reaffirmed that mere delivery under a contract to sell does not transfer ownership until the condition of full payment is satisfied.

Evidence Assessment on Third-Party Payment

The Court examined documentary evidence showing that Leanillo paid four installments and that receipts described the payments as partial payment of respondent’s existing account with Davao Diamond relative to the compressor. The Court found no competent evidence that Davao Diamond had rescinded or cancelled its contract with respondent or that Davao Diamond had entered into an independent contract to sell the compressor to Leanillo. The receipts and surrounding circumstances supported the CA’s conclusion that Leanillo paid on behalf of respondent rather than in her own right.

Procedural Rule on Pre-trial and the Partnership Claim

The Court emphasized the procedural rule that issues to be tried must be raised in the pre-trial order. It held that respondent failed to raise the claim that Leanillo’s payments were derived from respondent’s partnership share or that a partnership existed among petitioner, respondent, and Leanillo in the pre-trial order, and thus those issues could not be considered. The Court applied the pre-trial doctrine articulated in LICOMCEN,

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